Marketwise
Edited By Andy Cohen
Four Tips For A Successful ’09 Expert advice for starting the new year off right
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What recession? Those distributors that want to succeed in 2009 need to focus less on the negative and more on the positive, according to numerous business experts. At this point the economic realities are clear to all. As a result, “business people need to pull their heads out of their butt,” says Scott R. Ringold, CEO of Powerfeedback. “Yes things are tough, but they are always tough for small businesses.”
He recommends tuning out and turning off all the news stations immediately as “they will drag you down mentally and emotionally.” Aside from maintaining a positive attitude, here are four tips for distributors looking to rally during what most believe will be a challenging year:
1. Renegotiate. Things are tough for everyone. Why not take advantage of that fact? Start by renegotiating your lease. “It’s not uncommon for them to lower the rent rather than risk losing a reliable tenant and source of revenue,” says Brian Carlson, CEO of Excel National Bank. Or, if the money is available, consider purchasing commercial space. “With real estate prices plunging, there are deals to be had,” he says. Cell phone plans and other overhead costs can also be reworked to a company’s advantage.
2. Motivate. Implement a customer appreciation program where aside from sales calls, clients get “touched” with something four times a year, says Christopher Flett, founder of Ghost CEO. It can be a magazine subscription that matches their hobby, a thank you card “or something else that isn’t expensive, but has impact.” Employees are nervous too and need some encouragement during these trying times. Plan a couple of outings for your employees, says Rob Wilson, president of Employco. Again, it does not have to be expensive, but “a social event could be extremely beneficial.”
3. Eliminate. It is a good time to seriously reevaluate suppliers to ensure you are getting the best value. Commit to a monthly review of sales generated by products and services offered, says Ed Horton, CPA and partner at Citrin Cooperman & Company. “Strong sales of one product can mask weak sales elsewhere and drag down overall profits,” he says. If information is tracked, decisions can be made as to whether to improve slumping products and services or eliminate them from the mix entirely. Now is a time to focus on profitability – and eliminating underperforming functions at your company is one way to help the bottom line.
4. Propagate. Take a good, hard look at what worked in 2008 and what didn’t. Then you should focus your efforts in 2009 on pushing forward with the tactics that were effective. Companies that don’t do evaluations often enough “either repeat mistakes or don’t give enough attention to things that work,” says Flett. “The team should look at dropped balls and missed opportunities. Distributors need to decide what can be done differently this year.” They should also look at the best practices that worked and say “how can we do more of that?” – KH
Study: Small Businesses Unsure About Survival
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Credit relief is the chief cause of concern among the country’s 27 million small business owners, according to a recent study conducted by management consulting firm George S. May International. The majority of owners feel credit relief is critical to their survival, however more than 60% do not feel it will come in time to help save them.
“No matter what industry you are in, be it distribution of manufactured goods, construction, or operating an ice cream shop, small businesses are all affected by the current credit situation,” says Paul Rauseo, managing director of George S. May International. “Credit lines are being pulled, rates are unusually high and sales are declining due to deferred buying decisions.”
As the new administration gets started this month, 35% of the 750 business owners polled in this survey said credit relief was their top expectation. This was followed by affordable health care for employees (33%) and tax rebates or incentives (32%).
“Banks are taking a much harder look before extending credit,” says John McWilliams, president of Keystone Specialties Inc. (asi/242353). “Money is available if you have a good relationship with a smaller bank. If it’s a larger bank there are a lot of hurdles. Unless you have a really good profit picture, you can forget about getting credit. They’re too busy bailing themselves out of the mortgage market.”
Tonia Allen Gould, president of Tag! The Creative Source LLC (asi/341358), says that distributors need to show profit these days – even if it infringes on the salaries of the owners. “It’s important to leave money on the books each year,” she says. “No matter how bad it hurts, you have to leave money on the books if you want credit financing.”
Gould, for one, secured a Small Business Administration loan in January 2007. “The paperwork was ridiculous, but I have said and always say, this is a highly cash-intensive business,” she says. “You need to have it.”
Available credit is of growing concern as more businesses report cash flow problems. According to the Discover Small Business Watch in November, 44% of business owners experienced cash flow issues during the previous 90 days. This was the highest rating since April.
Gould says while credit terms haven’t changed at all with her suppliers, TAG! is getting calls right at the 30 day mark when money is due. “They’re starting to make the first call a lot sooner,” she says. “They are just looking to hear a voice on the line at this point in time to make sure everyone is still in business.”
Still, McWilliams sees things turning around, however slowly it may be happening. “Gasoline is down. Housing is under control. Things will start to ease in the middle of the year,” he says. “It will still take into the last quarter of the year until people start spending money again. The oil companies drained it everywhere. High interest rates got whatever they didn’t get.” – KH
Internet Advertising Revenues Increase in Q3
Despite an ailing economy, Internet advertising revenues grew 11% in the third quarter of 2008, according to an industry report. Revenues reached an estimated $5.9 billion, the second-highest quarterly total ever. “A weakening economy will continue to be a challenge to all forms of advertising-supported media,” says David Silverman, a partner at Pricewaterhouse Coopers. “However, the Internet should be better poised to withstand the storm given its ability to combine performance-based advertising with broad-based branding.”
Through September, Internet advertising revenues totaled $17.3 billion this year, up from $15.2 billion during the same period last year. Since 2000, revenues have surged. Eight years ago, Internet advertising revenues totaled about $8 billion annually. This year alone, revenues are expected to eclipse $22 billion. “Interactive advertising continues to be the most measurable and cost-effective way to reach consumers, and we see more and more marketers seeking to harness its power,” says Randall Rothenberg, president and CEO of the Interactive Advertising Bureau.
Third quarter revenue data is estimated. Actual results will be issued when fourth quarter statistics are released next month. Data was compiled by the New Media Group of Pricewaterhouse Coopers. The results are measured in Internet advertising revenues from a variety of sources, including Web sites, commercial online services and ad networks. – DV
InnerWorkings Names New CEO
ounselor Top 40 distributor InnerWorkings Inc. (asi/168860) has announced that Eric Belcher will become CEO, succeeding Steven Zuccarini, who held the company’s lead post for the last four years. Belcher, who assumed his new role on January 1, has served as president at InnerWorkings since April. “This is part of a long-term plan,” says Belcher. “I’ve worked side by side with Steve for years and I’ll continue to do so in the future. I’m honored to be leading this company.”
Belcher started at InnerWorkings in 2005. He was hired as executive vice president of operations and was promoted to COO the following year. Previously, he worked at manroland, Inc., Marakon Associates and E & J Gallo Winery in a variety of finance, sales and marketing positions. Zuccarini will remain with InnerWorkings in the newly created role of vice chairman. He has worked at the company since 2004. “We are well positioned for the future,” says Zuccarini. “I look forward to continuing to play a role in the ongoing success at InnerWorkings by ensuring a smooth CEO transition and by serving in my role as vice chairman.”
InnerWorkings, which employs 768 people, has experienced rapid growth in the last few years. Since 2003, company revenues have surged 1,677%. Its 2007 revenues were $288 million. Its sales increased markedly last year, after InnerWorkings acquired Top 40 distributor Corporate Edge in 2006. InnerWorkings expects 2008 revenues to reach between $435 and $450 million. Belcher says his company will continue to be active in trying to strengthen its position. “I think there’s going to be a convergence of print and promotional products in the next five to 10 years and we’re happy to be in the center of it,” says Belcher. InnerWorkings ranks as the 19th largest industry distributor, with $83 million in North American ad specialty revenues in 2007.
Also, Belcher was most recently named to Counselor’s Power 50 list for the first time. – DV
A Good Time to Raise Prices?
The cost of doing business has soared for many distributors. However, because the nature of selling promotional products is so price-sensitive, many have been leery about raising prices. The thinking for some is “business is hard enough to come by, why would I want to scare away my existing clients?”
However, some business management experts are making some compelling arguments as to why now is a good time to raise prices. The first point is that a difficult business environment gives businesses every right to pass along the extra costs to their customers. Another point suggests keeping prices the same but offering less in terms of service or product. And finally, another expert says to raise prices very high so when a customer balks, there is some wiggle room.
Distributors are attacking the rising costs of goods and infrastructure in a myriad of ways. Looking for economies of cost has been Win Oppel of the Ad-Merica Corporation’s (asi/107275) strategy. “We look at where the events our client is purchasing product for will be held and if practical and cost effective, we use a supplier located physically close to the event,” he says. “We also look to provide our clients with guidance regarding bundled purchases, and planning to avoid costly freight charges.”
Henry Cook III, vice president at Team World Inc. (asi/342534), says passing along the cost of goods from the suppliers is a part of doing business, especially in difficult economic periods. Instead of trying to keep prices the same, he will suggest a less expensive short sleeve T-shirt versus a long sleeve T-shirt to help clients stay on budget.
However, when it comes to things he can control, like the extra services Team World provides regarding warehousing and literature fulfillment, “it’s not the right time to engage in a price increase.”
Other distributors agree to the point that they haven’t raised prices on their goods at all. Howard Weisberg, owner of Specialties Unlimited (asi/331339), says, “Manufacturers are working nicely with distributors and helping where they can. They are willing to waive rush charges. Suppliers are being flexible and are willing to do many things to help you. I don’t see any reason to raise prices right now.”
“We’ve been steady as far as pricing,” says Jose Alejo of Alejo USA (asi/116450). “Our business hasn’t gone down at all. We don’t have a lot of overhead here. The equipment is ours. There are only two of us. I don’t see the need for any price increase.”
Later this year, however, may be a different story, says Alejo. “There have been some price increases from suppliers,” he says. “I have the feeling [in the coming months], it will be time to make some adjustments.” – KH
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